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Third Quarter 2015

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Posted 2015-09-08

Fear of Liftoff: Uncertainty, Rules, and Discretion in Monetary Policy Normalization

by Athanasios Orphanides

As the author describes it, the Federal Reserve’s muddled mandate to attain simultaneously the incompatible goals of maximum employment and price stability invites short-term-oriented discretionary policymaking inconsistent with the systematic approach needed for monetary policy to contribute best to the economy over time. Fear of liftoff serves as an example.

Posted 2015-09-08

Human Capital and Development

by Rodolfo E. Manuelli

Perhaps no question has attracted as much attention in the economics literature as “Why are some countries richer than others?” In this article, the author revisits the “development problem” and provides some estimates of the importance of human capital in accounting for cross-country differences in output per worker.

Posted 2015-09-08

Monetary Policy in Small Open Economies: The Role of Exchange Rate Rules

by Ana Maria Santacreu

Understanding the costs and benefits of alternative monetary policy rules is important for economic welfare. Within the context of a small open economy model and building on the work of Mihov and Santacreu (2013), the author analyzes the economic implications of two monetary policy rules.

Posted 2015-09-08

A Model of U.S. Monetary Policy Before and After the Great Recession

by David Andolfatto

The author studies a simple dynamic general equilibrium monetary model to interpret key macroeconomic developments in the U.S. economy both before and after the Great Recession.

Posted 2015-09-08

Quantitative Macro Versus Sufficient Statistic Approach: A Laffer Curve Dilemma?

by Alejandro Badel

This article highlights two approaches to tax policy for the top 1 percent of earners: dynamic general equilibrium models requiring complicated calibration and simulation algorithms and strong structural assumptions vs. the sufficient statistic approach, which attempts to parsimoniously reach the trinity of empirical, theoretical, and policy relevance.